PENANG - The Malaysian peninsula's second-largest state of Perak is known here
as darul ridzuan, or the land of grace. But there's little grace in the
state's politics these days as it turns into the country's latest political
battleground.
The opposition People's Alliance (PA), which rules the state with a slim
majority, is bidding to ward off a challenge from the central government's
ruling coalition, the Barisan Nasional (BN), which is seeking to wrest back
control of the state. Much is at stake as deputy premier Najib Razak attempts
to bolster his credentials ahead of a power transition, in which he is due next
month to take over from Prime Minister Abdullah Badawi.
The BN has suffered two morale-sapping parliamentary by-election defeats after
a general election setback last March. In
both instances, Najib spearheaded the election campaigns, one last August and
one this January, and ended up on the losing side. Perak was one five states to
fall to the PA at last year's general elections, but its wafer-thin majority
could be overturned if the BN succeeds in enticing assembly workers to its
side.
The political stakes are high and analysts say Najib needs something to show
his restless party members at the upcoming general assembly of the dominant
United Malays National Organization after recent demoralizing electoral losses.
The bigger danger to the country is that the political battles risk diverting
attention away from the sliding economy, which is clearly losing steam as
latest official statistics indicate.
A 7 billion ringgit (US$1.9 billion) stimulus package - equivalent to around 1%
of gross domestic product - announced last November has so far failed to have
much growth stimulating impact. The government has estimated 5 billion ringgit
of the package will be earmarked for small construction and development
projects, such as affordable housing, roads, schools, bridges, hospitals and
the upgrading of police and military facilities.
Those outlays are widely viewed as too little, too late. Analysts have already
pointed to leakage in the form of remittances by foreign construction workers,
which will be sent back to their home countries rather than stimulating local
growth. Opposition supporters believe that per usual rent-seeking and the lack
of tenders for government projects will reduce the real multiplier effect of
fiscal package.
The government is expected soon to announce a second stimulus package, but the
worry is that increased spending will push the projected fiscal deficit for
2009 from 4.8% to perhaps 5.5% of GDP. Meanwhile alarm bells are ringing across
the private sector, particularly for export-oriented industries. Bad
manufacturing news is piling up, especially in the crucial electronics sector.
US tech giant Intel's closure of five plants worldwide includes two assembly
test plants in Penang, the heart of Malaysia's electronics industry. The move
is expected to affect between 5,000 and 6,000 employees worldwide, though the
company said in a global statement that not all employees will be sacked and
some "may be offered positions at other facilities". Intel has four other
plants in the Malaysia and even if few jobs are actually lost, the impending
closures have rattled many.
In November, Malaysia's exports fell by 5% compared with the same month in 2007
as global demand fell and commodity prices plunged. Malaysia's exports mainly
comprise electrical and electronic products (40%), crude oil and
petroleum-based products (11%), and palm oil and palm-oil based products (10%).
The most worrying drop was in the exports of electrical and electronic
products, which fell 16% over the same period.
Although the national trade surplus increased by 10.6%, lagging indicators
suggest turbulent times ahead. Total imports slumped 9% in November, with much
of the plunge due to an 8% fall in intermediate goods that make up 72% of total
imports. This was in line with a similar fall of 8% in the industrial
production Index.
The number of workers engaged in the manufacturing sector in November also fell
by 5% from a year earlier. Unemployment was officially quoted at 3.1% in the
third quarter of 2008, but it is likely to inch upwards in 2009 as more
export-oriented firms shed workers. Malaysia's main export markets, Singapore,
the United States and Japan, are all suffering from the global slowdown. In
tow, the Malaysian Institute of Economic Research indices for business and
consumer confidence have both revealed a deepening pessimism.
Some economic analysts now predict Malaysia's GDP growth will fall to 1% this
year; others believe such estimates are overly optimistic and that the country
is headed for recession. Bank Negara, the country's central bank, still has
leeway to ease monetary policy and cut interest rates. It has recently slashed
its benchmark overnight policy rate by 75 basis points to 2.5%. But with
confidence waning, analysts say, that is unlikely to spur substantially
consumer spending.
Many hope that the second stimulus package now under consideration will be able
to arrest the slide. But with the risk of possible leakage, it remains to be
seen if it will be better designed to stimulate grass roots activities than the
first. Worryingly, BN political leaders appear more preoccupied with shoring up
their waning support ahead of UMNO's general assembly and party elections in
March than dealing with the drifting economy.
Added to the mix was a recent public opinion poll that showed that Prime
Minister Abdullah, blamed by many inside the party for the BN's electoral
setback, is still more popular than his deputy - and slated successor - Najib.
With Anwar and his opposition PA lying in the wings, expect Malaysia's
political intrigue and economic drift to intensify in the months ahead.
Anil Netto is a Penang-based writer.
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